Federal Reserve policy makers last month worried that slowing global growth and a stronger dollar posed risks to the U.S. economy as they decided to maintain a pledge to keep interest rates low for a “considerable time.”
A number of officials said the U.S. expansion “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to minutes of the Sept. 16-17 Federal Open Market Committee meeting released today in Washington.
Stocks rose, sending the Standard & Poor’s 500 Index up the most
this year, and the dollar weakened as investors speculated that caution
over the economic outlook would lead the Fed to keep interest rates near
zero for longer.
The IMF yesterday cut its global growth forecast for 2015 and warned about the risks of rising geopolitical tensions.
“Not only are they not ready to raise rates, they don’t even want people to think they’re ready to raise rates, so it’s not even on the radar screen,” said Ward McCarthy, chief financial economist at primary dealer Jefferies Group LLC in New York.
Federal Reserve officials discussed altering their guidance on the likely path of interest rates at their September meeting, but decided against making any changes because of concerns they might be misinterpreted, minutes of the meeting showed Wednesday.
The Fed statement released three weeks after the meeting repeated that officials expected they would keep short-term interest rates near zero for a “considerable time” after the end of their bond-buying program.
number of officials noted that changes to the guidance “might be
misinterpreted as a signal of a fundamental shift in the stance of
policy that could result in an unintended tightening of financial
conditions,” the minutes said.
For this week, there are not many high impact news expect Draghi Speak which is on Thursday 9th October. As for Fundamental Indicator, CPI data significantly shows deflation for overall Euro and specifically on Spanish which is negative CPI data. For job data, unemployment for Euro is still high and there is no significant trend the unemployment trend is reducing. Italian unemployment data show significantly high. Current interest rate is the lowest in a decade.
As for technical analysis, currently the price is hold at psychological number 1.2500. I'm expecting the price will be retraced or ragging before it dip further. The entry strategy for now will be sell from bounce from any significant resistance.
Interest Rate and MPC Statement will likely to move the market this week which is on Thursday 9th October. In general fundamental indicator still have not shown economy recovery. Inflation rate still below 2%, trade balance is still negative and average earning still not shown significant improvement even though people of getting job are improved. BOE is watching inflation rate and wages in decision to increase interest rate.
As for technical analysis, major trend is still bearish and there is yet sign of reversal at the moment. As of now, I'm still bearish for GBPUSD and will execute sell from bounce at any significant resistance.
Fundamental and Technical Analysis for GBP as below.
1. News Calendar
No market movers news in this week.
2. Fundamental Indicator
In summary, based on the data below, there is significant correlation between Manufacturing PMI, CPI and currency GBP/USD which moving downward for 3 consecutive month. However, GDP and unemployment data shows improvement which suggest the economy is improving.
Therefore, the data suggest that long term trend is bullish and mid term trend is bearish.
Even so, economists said a big improvement would
be needed this month for the government to get back on track and the
chances of extra spending or tax cuts before the election in May 2015
seemed to be slipping away.
Britain's very weak pay growth helped limit
annual growth in income tax receipts and social security payments to
just 1.6 percent in August. In the tax year to date, income from those
sources was 0.6 percent lower than a year earlier.
4. Technical Analysis Technical analysis below suggest to Sell from bounce from strong resistance such as trendline or physcological number 1.6500.
The U.S. economy expanded in the second quarter at the fastest rate since the last three months of 2011 as companies stepped up investment and households boosted spending.
Busier assembly lines at the nation’s factories and job growth that’s
kept Americans spending indicate companies are a bit more upbeat about
the prospects for demand. As the world’s largest economy and labor
market improve, Federal Reserve policy makers are debating how much
longer to keep interest rates near zero.
“Consumer spending should benefit from strengthening labor conditions
and improved financial conditions,” while business investment should
also continue, she said.
New-home sales in the U.S. surged in August to the highest level in more
than six years, a sign that the housing recovery is making progress.
The housing market is improving in fits and starts this year amid slow
wage growth and tight credit conditions. Sustained improvement in the
job market will be needed to push up pay and sustain a stronger
Borrowing costs remain historically low even as Federal Reserve policy
makers signal they’ll start to boost their benchmark interest rate next
New-home sales in August reached the highest annualized pace since 2008.
But many builders and economists still expect sales for this year to
underwhelm, ultimately either matching or only slightly exceeding last
Dudley said that to hawks on FOMC, he said that the Fed has a dual
mandate, and that monetary does work with a lag: “you wouldn’t put all
your weight on inflation side just as you wouldn’t put all your weight
on the labor side.”
Dudley said that with respect to interest rates at the “zero lower
bound”: “That’s not really a particularly comfortable place to be.”
The European Central Bank president said a planned asset-purchase program shows that policy makers will steer the size of the institution’s balance sheet to avert deflation.
“Unacceptably high unemployment and continued weak credit growth are likely to curb the strength of the recovery. The risks surrounding the expected expansion are clearly on the downside.”
Even after cutting borrowing costs for banks to record lows and offering
long-term loans, Draghi is struggling to persuade them to take more ECB
cash to finance lending to the real economy. In contrast to other major
central banks, the ECB’s assets have shrunk by a third since 2012.
Economic growth in the euro area came to a halt in the second quarter and Draghi said yesterday that recent indicators have given no indication that the “sharp decline” in economic activity in the region has stopped .
4. Technical Analysis
- Entry to apply Sell from bounce from any trendline.